The Indonesia-EU Comprehensive Economic Partnership Agreement (IEU-CEPA) and President Trump's new tariff policy will push Indonesia's exports to become more diversified. Exports to the EU are likely to increase, while the export market to the US may not necessarily contract.
However, Indonesia's trade relations with the United States (US) and the European Union (EU) show different dynamics. This will affect Indonesia's commodity export diversification strategy after the implementation of the two policies this year.
The United States is Indonesia's second largest export market for commodities and products after China. Indonesia's trade with the United States in 2024 reached around US$ 42.9 billion. With the value of Indonesia's commodity exports to the US amounting to US$ 26.3 billion, the goods trade surplus for Indonesia was recorded at US$ 16.8 billion.
Indonesia's main exports to the US include electrical and electronic equipment, clothing, animal/vegetable oils and fats, and footwear.
Meanwhile, the EU is a region in Indonesia's top five trading partners, with total exports of US$ 17.1 billion in 2024. Indonesia recorded an increasing non-oil and gas trade surplus with the EU, reaching US$ 4.5 billion in 2024.
Indonesia's main exports to the EU in 2024 include vegetable and animal oils (mainly palm oil), footwear and electronics.
The IEU-CEPA agreement expected to be finalized in September 2025 will remove tariffs on Indonesian exports to the EU and push most commodities tariff-free by 2027. This includes duty-free access for crude palm oil.
The potential for diversification of Indonesia's export commodities from the US to Europe is possible, mainly due to differences in tariff and regulatory policies. While the US imposes a 19% tariff on many Indonesian commodities, the IEU-CEPA offers tariff elimination - making the EU market more attractive in terms of cost.
On the other hand, the European market has a strong and growing demand for sustainable products, driven by regulations such as the EU Deforestation Regulation (EUDR) which requires deforestation-free products and strict monitoring for commodities such as palm oil, coffee, cocoa and rubber. While compliance with these EU standards poses challenges, it also creates opportunities for Indonesia to access premium markets that value sustainability.
